Small Commercial Real Estate Loans Under $1M

A $400,000 loan is too small for most balance-sheet lenders to care about and too large for a consumer product to touch. That gap is where most small commercial deals stall.

Why the small end gets skipped

Origination cost does not scale down with loan size. Underwriting a $350,000 deal costs a bank nearly what it costs to underwrite $3 million, so the smaller loan earns less against the same work.

Banks respond by raising minimums. Community lenders increasingly want $500,000 or $1 million and up, and they want the property to come with the borrower's primary banking relationship.

What fills the gap

Private and balance-sheet lenders price on the asset rather than on tax returns. That shift is what makes sub-$1 million deals fundable at all.

Expect a lower leverage ceiling and a shorter initial term:

• Loan to cost generally tops out near 90% on the right asset class
• Rates land in the high single digits to low teens depending on the program
• Term is often 12 to 24 months on bridge structures, with 25-year amortization available on stabilized debt-service products
• Close in 7 to 15 days when the file is complete

Stabilized, cash-flowing property qualifies for debt-service coverage financing with 30-year terms and rates between 6.125 and 8.5 percent, which is materially cheaper than bridge money.

The size constraint runs both ways

Small deals are faster and simpler, but closing costs do not shrink with loan size. Recording fees, appraisal, and legal land the same.

If the property will be held long term, plan the exit at origination. Refinancing out of an expensive short-term structure into permanent debt is the normal path, and it should be underwritten before you buy rather than after.

What actually determines approval

The property, the loan to value, and the exit. Credit matters, though rarely as much as conventional lending suggests, and documented income is usually secondary to the asset itself.

Small commercial financing is available. It simply does not come from the place most borrowers look first.

See what you qualify for or call (888) 562-1119. For investment property purchases in New Jersey and Florida, Fathom Realty can help on the acquisition side.